February 01, 2016

Notice Periods for Without Cause Terminations

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In the absence of an employment agreement that expressly sets out a notice period upon termination, employees who are terminated without just cause are entitled to a notice period or pay in lieu of notice from their employers in accordance with the common law. If an appropriate notice period is not given, employees may sue for wrongful dismissal.

The key case setting out the factors to be considered when determining the applicable common law notice period is Bardal v. Globe and Mail, [1960] O.J. No. 149. These factors include the employee’s age, length of service, character of employment, and the availability of similar employment in the context of the employee’s experience, training and qualifications.

Two new decisions out of the Ontario Superior Court of Justice are recent examples of the application of the Bardal factors to determine the applicable notice period.

Lalani v. Canadian Standards Assn., 2015 ONSC 7634 (December 10, 2015) involved a 60 year old employee with an Electrical Technician diploma. He worked with the Defendant employer for 39 continuous years, which was the employee’s entire working life. For the first 28 years of employment, he worked as a skilled technical employee or front-line supervisor. He then held middle management positions for the remaining 11 years of his employment. He was terminated without just cause.

The Court pointed out that a notice period in excess of 24 months is generally only awarded in exceptional circumstances. The employee argued that this was an exceptional circumstance warranting additional notice because he worked for the Defendant employer for his entire life. This argument was not accepted, however, because the duration of employment was already a considered factor. The Court concluded that a notice period of 24 months was appropriate.

Kurtz v. Carquest Canada Ltd., 2015 ONSC 7997 (December 21, 2015) involved a 50 year old employee with a Master’s degree in Business Administration. He had been employed by the Defendant employer for 5.5 years. He began as a supervisor and was eventually promoted to senior management as Director of Operations at a distribution centre in California. When this centre closed, he was transferred to another of the employer’s distribution centres in Ontario to fulfill the same role. It was from that centre that he was terminated. The Defendant employer alleged just cause for termination, but this was not made out, so the employee was entitled to damages for reasonable notice.

The Court noted that the employee’s age would not significantly increase the notice period and his tenure was only modest. The character of his employment as senior management and the necessity of the Employee having to relocate back to the United States were factors that warranted an increased notice period. The Court concluded that the appropriate notice period was eight months.

Lessons for Employers

Employees who are terminated without just cause, who do not have an employment contract or who have a contract that is silent in regard to notice of termination, are entitled to notice or pay in lieu of notice consistent with the common law. The applicable notice period ranges from the statutory minimum as set out in labour standards legislation up to 24 months, with the possibility of a greater notice period in extraordinary circumstances. Employees do have a duty to mitigate during the notice period and damages may be reduced in accordance with income earned by the employee during that time.

Employers are advised to enter into written employment contracts with employees that expressly set out notice provisions on termination and require the employee to mitigate any damages. Such contracts can provide much needed clarity to the parties.

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